Some of my clients are well aware of my exposure to gold. The long-term outlook for the yellow metal remains strong, but investors should avoid succumbing to emotional biases and arbitrary price targets. I anticipate a slight decrease in gold prices from their current levels over the next few weeks or months, but there is no cause for concern for those with a long-term perspective. Similar to a pressure cooker, the hot air or pressure occasionally needs to be released.
Here is a section from a story on Bloomberg shared by a client:
Gold fell the most in more than two years as surprise strength in a key US jobs report dashed hopes that the Federal Reserve will be able to start lowering borrowing costs soon.
Treasury yields and the dollar surged after the US government’s May employment report showed job growth exceeded expectations and wages were hot. Bullion slumped as much as 3.1%, the most since March 2022, while base metals also tumbled.
“A strong jobs report reversed a great deal of the rate cut excitement that had built during the past week,” said Ole Hansen, head of commodity strategy at Saxo Bank AS. “This report removes hopes for earlier rate cuts, with sticky wage growth and robust employment in need of high rates to cool.”
Fed officials have said they need more evidence that inflation is easing toward the central bank’s 2% target as they consider when to cut rates, while investors are looking for conviction of a soft landing that would justify US rate cuts. Lower borrowing costs typically boost gold, which doesn’t pay interest.
After surging to a record above $2,450 an ounce, bullion has traded in a fairly narrow range amid the uncertainty over the Fed’s rate trajectory. Swap traders now no longer fully price in a rate cut before December.